Finance minister to request states on duty cut amid nationwide protests, while PSU oil companies work on their financials to reduce borrowings.
Under attack from adversaries and friends alike, the UPA government scrambled to avert a political headache in the wake of the oil price hike. Finance Minister Pranab Mukherjee will write to all state governments to cut sales tax and vat at their end to reduce the burden of last evening’s oil price hike on the common man.
The Congress-led UPA government feels the move would ensure that the Centre is not solely held responsible for the deeply unpopular political decision.
In his two-page letter, Mukherjee will tell the chief ministers that substantial sales tax or vat on petroleum products are levied by the state governments. They may consider reducing these levies on diesel, kerosene and domestic LPG in line with the duty cut undertaken by the Government of India.
The Congress came out in support of the government as political temper soared. “There are times when you are compelled to take hard decisions. There is no doubt that petro-price hike leads to difficulties for common man, but facts will show there was no other way.” The Congress has also asked its state governments to reduce sales tax or vat in their respective states.
So aggressive was the political protest that in Delhi police had to use water canon against BJP protestors. The government had to stomach barbs from allies like Samajwadi Party and Trinamool Congress. SP General Secretary Mohan Singh said: “The SP was compelled to extend support to the UPA for the sake of stability. But now our workers are finding it difficult to answer why the party is supporting an anti-people government.” Trinamool Congress’s Mamata Banerjee did not hide her disapproval when she announced that the state government would partially subsidise the increase. The Left parties and the trade unions have announced a “nationwide” agitation programme.
Punjab Deputy Chief Minister and SAD President Sukhbir Singh Badal said the UPA government “deliberately hastened the oil price hike as it feared that crashing crude prices everyday would leave no justification for a petro-price hike.” The BJP unit in Punjab called the hike economic terrorism and accused the UPA government of benefitting the OMCs at the cost of common man.
Mukherjee’s letter will also point out that the central government has sacrificed its revenues from the oil sector on accounts of customs and excise duty amounting to Rs 49,000 crore per year to minimise the impact on the common man. Even after this increase, the losses to the state-run OMCs for 2011-12 are likely to be in excess of Rs 1.2 lakh crore and the central government will have to pay substantial subsidy to the OMCs to ensure their financial viability.
Mukherjee will also argue that losses of the OMCs are very high now and if the crude price remains at $110 a barrel, it will rise further. “On diesel, kerosene and domestic LPG, the OMCs are losing more than Rs 13 per litre, Rs 20 per litre and Rs 380 per cylinder, respectively. But the increase is only Rs 3, Rs 2 and Rs 50 respectively,” the letter will say.
Meanwhile, Kerala Chief Minister Oommen Chandy has said his government would consider sales tax exemption on hike in price of diesel and LPG after studying the issue.
Bengal cuts cess on LPG by Rs 16
West Bengal Chief Minister Mamata Banerjee on Saturday announced withdrawal of cess on LPG, reducing by Rs 16 the price of a cylinder, following the fuel price hike by the Centre.
“I consulted my finance minister, Amit Mitra, after the midnight-decision of the central government to hike prices of diesel, LPG and kerosene and decided to withdraw cess collected by the state government on each LPG cylinder to give relief to the common people,” Mamata Banerjee said. “This will lead to a loss of Rs 75 crore to the state exchequer which we will mop up from other sources of income. But our government does not want to put more burdens on the people.”
The Union government yesterday announced hike in domestic LPG by Rs 50 for a cylinder, diesel price by Rs 3 a litre, and kerosene by Rs 2 a litre. Following the cut in the cess by the state government, the price of an LPG cylinder would cost Rs 401.10 instead of Rs 417.10 after the central hike in the state. The notification in this regard would be made on Monday. Cess will remain on diesel and kerosene. Banerjee said she did not support the price hike.
“They (UPA government) have raised prices of petrol many times in one year. Now they have hiked diesel, LPG and kerosene. Diesel is also needed for farming. The government must think many times before raising the price of diesel, gas and kerosene. We are not supporting this price rise,” she said. The increase in price of diesel, the most preferred fuel for transportation in the country is likely to lead to an increase in transportation cost of all commodities. The Left front carried out protest rallies against the hike in various parts of the state.
